New Delhi: Fitch Ratings on Tuesday forecast a 5 per cent contraction of Indian economy in the current fiscal, on account of slump in economic activities and very stringent lockdown policy.
This is substantially lower than 0.8 per cent growth for 2020-21 fiscal projected in April.
Fitch said it has made further cuts to world GDP forecasts in its latest Global Economic Outlook (GEO) for May, but the slump in global economic activity is close to reaching its trough.
"The biggest forecast cut was to India where we now anticipate a 5 per cent decline in the current financial year (ending March 2021) in contrast to an earlier forecast of growth of 0.8 per cent.
"India has had a very stringent lockdown policy that has lasted a lot longer than initially expected and incoming economic activity data have been spectacularly weak," Fitch said.
Read more: Unable to pay home loan EMIs in COVID-19 times? Know what you can do
This compares to an estimated 3.9 per cent growth in the previous fiscal. Growth is, however, expected to rebound to 9.5 per cent in 2021-22.
"World GDP is now forecast to fall by 4.6 per cent in 2020 compared to a decline of 3.9 per cent predicted in our late-April GEO. This reflects downward revisions to the eurozone and the UK and, most significantly, to emerging markets (EM) excluding China," said Brian Coulton, Chief Economist, Fitch Ratings.
India's GDP likely to contract 5% in FY 2020-21: Crisil
Days after the Reserve Bank of India (RBI) said that India's GDP growth for the financial year 2020-21 may remain in the negative territory, CRISIL has projected that the country's economy contract by 5 per cent this fiscal, downgrade from its previous estimate of 1.8 per cent growth.
In a report, Crisil said that although non-agricultural GDP is expected to contract 6 per cent, agriculture could cushion the blow by growing at 2.5 per cent.
It said "things have only gone downhill since" its previous forecast of 1.8 per cent growth on April 28.
The report noted that as per the available data, in the past 69 years, India has seen a recession only thrice, in fiscal years 1958, 1966 and 1980. The reason was the same each time, a monsoon shock that hit agriculture, then a sizeable part of the economy.
"The recession staring at us today is different. For one, agriculture could soften the blow this time by growing near its trend rate, assuming a normal monsoon. Two, the pandemic-induced lockdowns have affected most non-agriculture sectors," it said, adding that the global disruption also has upended whatever opportunities India had on the exports front.
(With inputs from PTI and IANS)
